Old and new mistakes made in Wash. Post column promoting tort reform

In his January 17 column, the Washington Post's Sebastian Mallaby defended a recent column in which he relied on a questionable study in arguing for tort reform -- but in doing so, he repeated some of his earlier mistakes and added new ones as well.

Mallaby began his defense:

The tort system is hideously inefficient. According to the Tillinghast-Towers Perrin numbers I cited last week, less than half of the $246 billion that it consumed in 2003 went to compensate victims of misfortune, because more than half was eaten up in administrative and legal costs. Why do I bring this up again? Because a representative of the trial bar called to protest that "there are no real numbers on this stuff," and because there's a big and interesting question that my last piece didn't get to.

But, as Media Matters for Americanoted in response to Mallaby's previous column, the administrative costs included in the Tillinghast study -- and necessary to Mallaby's argument that less than half of the funds "consumed" by the tort system go to "victims of misfortune" -- include things that might best be left out of a calculation of the costs of the tort system, like salaries for insurance company executives. Mallaby ignored this point, which has also been made by The Center for Justice & Democracy; he offered nothing to rebut the center's contention that Tillinghast's numbers include "costs not even vaguely related to the legal system."

Instead, Mallaby simply asserted that "the trial bar's 'no real numbers' claim is nonsense," hoping readers take his word for it, and again referred to these "administrators" expenses (read: insurance company salaries, among other things) as "direct costs of torts." As Mallaby might say: Nonsense.

Mallaby then acknowledged one of the primary arguments against "tort reform":

But the tort system creates an indirect benefit as well, and Bush would be a better advocate of tort reform if he had the honesty to acknowledge it. Thanks to the trial bar, companies may produce safer products.

But Mallaby immediately returned to the cost-savings argument:

How to weigh these costs and benefits? The first thing to be said is that the costs can be substantial. Before he became a Bush official, Mark McClellan co-authored a paper with Daniel Kessler of Stanford in the Journal of Public Economics; it found that states that enacted tort reform reduced spending on hospital patients with heart complaints by 4 percent, with no adverse health consequences.

We don't know if hospitals could achieve similar savings across the board. But 4 percent of a health system that costs around $1.5 trillion a year implies a saving of $60 billion annually. Add in the possibility that some of those resources could be used to come up with fresh treatments or management efficiencies, and the gains could be bigger. Add in savings from other industries, and you start to get an appreciable boost to living standards. This would mean, among other things, that more people could afford health care.

"We don't know" whether the McClellan-Kessler study can be applied across the board, Mallaby wrote. But as Factcheck.org has noted, the Congressional Budget Office (CBO) looked at the McClellan-Kessler paper and concluded:

When CBO applied the methods used in the study of Medicare patients hospitalized for two types of heart disease to a broader set of ailments, it found no evidence that restrictions on tort liability reduce medical spending. Moreover, using a different set of data, CBO found no statistically significant difference in per capita health care spending between states with and without limits on malpractice torts.

Having again stressed the "substantial" costs of the tort system, Mallaby returned to the benefits:

But what about the safety gains we get from the existing tort system? Here it really is true that no measure exists, because companies don't publish numbers on safety expenditures.

Indeed, such gains are difficult to measure -- and even the Tillinghast study Mallaby relied on took pains to note:

This study examines only one side of the U.S. tort system: the costs. No attempt has been made to measure or quantify the benefits of the tort system. This study makes no conclusion that the costs of the U.S. tort system outweigh the benefits, or vice versa.

But Mallaby is certain that -- even with an inflated assessment of the costs of the tort system, with the inflated inefficiency accompanying that assessment, and even with no real idea about how to measure the benefits of the current system -- we can do better. Mallaby wrote:

But it seems pretty clear that, however big these benefits are, intelligent tort reform could make them bigger.

That's good news, indeed, for anyone who is pro-safety. But what form would this "intelligent tort reform" take? Among Mallaby's suggestions are a statute of limitations on liability lawsuits, government regulation requiring disclosure of product safety records, and a web site listing the most error-prone hospitals.

Mallaby contends that "we don't know" how much benefit the current system provides -- and contends with confidence that limiting lawsuits and creating a web page listing error-prone hospitals will make the current benefit "bigger." He doesn't tell us how he can be so sure that "reform" will offer greater benefits when he lacks information about the benefits of the system he would reform. But to Mallaby, at least, it's "pretty clear."

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